Traders work on the floor of the New York Stock Exchange (NYSE) on Aug. 7.Jeenah Moon/Reuters
Canada’s main stock index rose to another record high on Friday, led by mining and real estate shares, as a surprise decline in U.S. employment last month cast doubt on a September interest-rate hike by the Federal Reserve. The S&P 500 also closed at a record high.
The Toronto Stock Exchange’s S&P/TSX Composite Index ended up 244.92 points, or 0.7%, at 36,381.23, eclipsing Wednesday’s record closing high. For the week, the index added 3.3%, its biggest weekly advance in four months.
U.S. nonfarm payrolls decreased by 23,000 last month and payrolls for the prior two months were revised sharply lower.
“U.S. is what’s driving the market ... so a weak number, which normally you would say is not good, but bad news is good news in this case,” said Allan Small, senior investment adviser of the Allan Small Financial Group with iA Private Wealth.
Canada’s jobs report was more upbeat, with employment jumping by 75,100 positions and the jobless rate falling for the third consecutive month. Still, the data did not alter expectations for the Bank of Canada to leave its benchmark interest rate on hold at 2.25% in September.
The materials group, which includes metal mining shares, rose 4.7% as gold climbed to a seven-week high on reduced Fed rate-hike expectations.
B2Gold Corp shares jumped 22.5% and IAMGOLD Corp was up 13.7% after both companies reported quarterly results.
The rate-sensitive real estate sector was another standout, adding 1.1%.
Shares of Altus Group jumped 15.1% after the real estate services company reported higher-than-expected quarterly revenue.
Financials were a drag, falling 0.4%. Insurer Sun Life Financial reported higher quarterly profit on strength in its Asia and domestic business. Still, its shares ended 1.2% lower.
Energy lost 1.1% even as oil clawed back some of its weekly decline amid uncertain negotiations to reopen the Strait of Hormuz. U.S. crude oil futures settled 1.15% higher at US $78.18 a barrel.
Market expectations for a rate hike from the Fed at its next meeting dropped to about 44%, according to CME FedWatch, down from 55% in the prior session and 67% a week ago. Signs of progress for a potential peace deal in the Iran war have helped cool oil prices and, in turn, have eased inflation worries that could prompt a Fed rate hike and pushed Treasury yields lower.
A strong earnings season has also tempered concerns about the massive spending by AI-related companies, sending each of the three major U.S. indexes to their biggest weekly percentage gains since mid-April.
“You probably have to lower rates to kind of stimulate job growth, but if you lower rates, you’re going to also stimulate inflation. So you’re kind of in a pickle at this point, and yet the market’s just taken off because earnings have been stellar,” said Tom Siomades, chief market economist at AE Wealth Management in Topeka, Kansas. “The market should be reacting to weak job numbers and higher inflation and the possibility of a slow-growth economy that may need to have rates raised rather than cut, and yet it’s not. We’re setting records, so go figure.”
With earnings season entering the final stretch, of the 436 companies in the S&P 500 that have already reported results through Friday morning, 85.1% have topped analyst expectations, according to LSEG data — well above the 68% average since 1994.
Under new Fed Chair Kevin Warsh, the U.S. central bank has offered investors little forward guidance on monetary policy, leading market participants to focus on economic data and commentary from policymakers.
The Dow Jones Industrial Average rose 151.83 points, or 0.28%, to 54,036.93, the S&P 500 gained 47.68 points, or 0.62%, to 7,757.64 and the Nasdaq Composite gained 342.26 points, or 1.30%, to 26,690.62.
For the week, the S&P 500 gained 3.58%, the Nasdaq rose 5.19%, and the Dow climbed 2.96%.
Elon Musk’s SpaceX surged 15.8% a day after the expiry of the first of several share lockup restrictions following its record public offering in June.
Collaboration software maker Atlassian shot up 35.3% for its largest-ever daily percentage gain, while chip company Microchip Tech jumped 13.9%, its best daily performance in more than 15 months, after both forecast quarterly revenue above estimates.
Among other movers, vacation rental company Airbnb rose 17.4% as the best performer on the S&P 500 after beating second-quarter revenue estimates. In contrast, Trade Desk plummeted 21.9% as the worst performer on the benchmark index after the ad-tech firm forecast third-quarter revenue below expectations.
Advancing issues outnumbered decliners by a 2.49-to-1 ratio on the New York Stock Exchange and by a 2.07-to-1 ratio on the Nasdaq.
The S&P 500 posted nine new 52-week highs and one new low while the Nasdaq Composite recorded 123 new highs and 77 new lows.
Volume on U.S. exchanges was 16.94 billion shares, compared with the 17.56 billion average for the full session over the last 20 trading days.
Reuters, Globe staff